Op-ed: A savings plan with a catch

The government has presented a 5 billion euro savings plan that will allow them to pay for budgeted expenses. Wait a minute, are there really cutbacks? In the first place, they have only forced companies to pay taxes several months in advance, such that the national government will gain some liquidity as they enter the new year. But those funds would be subtracted from next year?s balance sheet, which will be managed by the government that is elected in November. That is, it will be someone else?s problem.

So the plan is not exactly a budget cut, and on top of that, provides liquidity for some companies that have seen better days. Something else they have done is to announce a discount on the VAT from 8% to 4% for new home purchases. The Partido Popular has already declared that it was to restore tax relief for homebuyers, and that had caused potential buyers to hold on to their funds until the measure was approved. So this government has tried to increase demand and improve their tax revenues and help the real estate and banking sectors at the same time. Doing so would help boost credit nationwide according to Salgado.

Still, we have a debt problem. There are not many positive views and prices are already too high. Instead of pushing for an adjustment, it is elevating prices further. I respect lowering costs of the treatment, because this means a savings for regional governments. But don?t rationalize demand as though it would be some sort of copayment. And above all we are postponing the cutback in spending that is needed.